After several rumours that Tether was used to spike Bitcoin prices in the build-up to its peak late last year, a new research has now unearthed the truth, Bloomberg reports.
The latest research report by a finance professor at Texas University evaluates the role of Tether in the inflated prices of Bitcoin and other cryptocurrencies last year. By using algorithms, the research finds a significant association in the price spike.
According to the report Tether, one of the most-traded cryptocurrencies, exhibits a pattern of being utilized on Bitcoin at crucial moments that allowed Bitcoin prices to reach an all time high in December.
The study examines the interaction between the largest cryptocurrency, Bitcoin, other major cryptocurrencies, and Tether, a cryptocurrency that accounts for a greater transaction volume than U.S. dollars.
Bitfinex and Tether Collusion
Many major players in the industry had expressed concern when prices skyrocketed last year, over the potential involvement of Bitfinex. One of the biggest crypto exchanges, Bitfinex is also apparently the least regulated in the industry. The exchange is registered in the Caribbean and was subpoenaed by the U.S. Commodity Futures Trading Commission (US CFTC). Tether was also subpoenaed, and shares the same CEO as Bitfinex.
The focus of research was on the flow of digital tokens going in and out of the Bitfinex. This brought about multiple distinct patterns that suggest that the prices were being pushed at the exchange, while they slumped at other exchanges.
The paper states:
A similar analysis of the flow of coins on the much larger Bitcoin blockchain shows that the 3 three main Tether exchanges for most of 2017 (Bitfinex, Poloniex, and Bittrex) also facilitate considerable cross-exchange Bitcoin flows among themselves.
Furthermore the researchers reported:
We find that the cross exchange currency flows are closely matched on the Tether and Bitcoin blockchains. This independently verifies our algorithm for categorizing the exchange identities, and in addition shows that wallets associated with Bitfinex send Tether to Poloniex and Bittrex in exchange for Bitcoin.
The basis of the research is the records of the millions of transactions that are available on the public ledgers of all cryptocurrencies. When examining the flow of Tether, it was noticed that it was issued exclusively by Bitfinex in huge numbers.
Furthermore, Mr. Griffin and Mr. Shams found that about half of the increase in BTC price in 2017 can be traced to the time immediately after Tether was sent to other exchanges, whenever the price took a dip.
In the past, Bitfinex has denied that they have been involved in any kind of manipulation. The research shows that the price spike came to a halt when Bitfinex stopped issuing new Tether this year.
Do you think Bitfinex and Tether manipulated BTC’s price? Let us know in the comments section.